10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 The Global Crash 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 Also by Leila Simona Talani FROM EGYPT TO EUROPE THE FUTURE OF EMU BETWEEN GROWTH AND STABILITY: The Demise and Reform of The Stability and Growth Pact (co-authored) EUROPE AND THE BALKANS: Policies of Integration and Disintegration AFTER MAASTRICHT (co-edited) EUROPEAN POLITICAL ECONOMY: Political Science Perspectives BETTING FOR AND AGAINST EMU. WHO WINS AND WHO LOSES IN ITALY AND IN THE UK FROM THE PROCESS OF EUROPEAN MONETARY INTEGRATION 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 The Global Crash Towards a New Global Financial Regime? Edited by Leila Simona Talani 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 Editorial and selection matter © Leila Simona Talani 2010 Individual Chapters © Contributors 2010 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2010 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave ® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN-13: 978–0–230–24341–5 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data The global crash : towards a new global financial regime? / edited by Leila Simona Talani. p. cm. ISBN 978–0–230–24341–5 (hardback) 1. Global Financial Crisis, 2008–2009. 2. Banks and banking. 3. Capitalism. 4. International economic relations. I. Talani, Leila Simona. HB37172008.G55 2010 332 .042—dc22 2010010923 10987654321 19 18 17 16 15 14 13 12 11 10 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 Al piccolo Gabriellino 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 This page intentionally left blank 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 Contents List of Figures and Tables viii List of Contributors x Introduction 1 Leila Simona Talani 1 The Banking Crisis: Causes, Consequences and Remedies 10 Paul De Grauwe 2 The Moral Economy of Money and the Future of European Capitalism 32 Stefan Collignon 3 Reconsidering the Role of Ideas in Times of Crisis 52 Erik Jones 4 Challenging the Dollar in International Monetary Relations? The Lost Opportunities of the Euro 73 Henrik Plaschke 5 Emerging Markets and the Global Financial Crisis 100 Giorgio Fazio 6 The Global Financial Crisis and the Crisis of European Neoliberalism 121 Alan W. Cafruny 7 The Impact of the Global Financial Crisis on the City of London: Will the UK Finally Decide to Join the EMU? 140 Leila Simona Talani Conclusion: Towards a New Global Financial Regime? 183 Leila Simona Talani Index 190 vii 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 List of Figures and Tables Figures 1.1 The Dow Jones and the S&P 500 2006–2008. 14 1.2 Index of share prices, Nasdaq 1999–2002. 15 1.3 Case Shiller composite indices (nominal). 15 1.4 DEM–USD 1980–1987. 16 1.5 Euro–Dollar rate 1995–2004. 17 1.6 European financials’ balance sheets. 18 1.7 Ratio of banks’ total assets to deposits (top five banks in each country), in 2007. 21 1.8 Normally distributed returns and observed daily returns in foreign exchange market. 22 2.1 Income distribution and poverty. 42 3.1 Four models for decision-making under crisis. 57 3.2 Four characteristics for decision-making models. 59 3.3 Stock market performance. 68 3.4 Long-term sovereign bond yields. 69 3.5 Euro exchange rates. 70 4.1 Euro share in international reserves and the dollar/euro exchange rate. 78 4.2 Euro share in international reserves-constant and current exchange rates. 79 5.1 Gross domestic product, constant prices, annual percent change. 103 5.2 Exports disaggregated by region (1998q1 = 100). 104 5.3 Emerging and developing countries, Net Direct and portfolio investment billions of US$. 105 5.4 US macroeconomic outlook. 108 5.5 National saving and investment as a share of GDP. 108 5.6 International reserves of advanced and emerging economies 1998q1–2009q2 (1998q1 = 100). 109 5.7 Trade balance of advanced economies disaggregated by region (1998q1–2009q1) billions of US$. 110 5.8 UK Brent and non-fuel commodity prices (1998q1–2009q2). 113 viii 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 List of Figures and Tables ix 6.1 Italy and Germany shares of world exports 1995–2006. 132 7.1 Bank lending to manufacturing industry in the UK 1975–1995 (% of bank lending to industry over total banking lending). 165 7.2 Total bank lending to manufacturing in the UK 1975–1995. 165 Tables 1.1 Six largest movements of the Dow-Jones Industrial Average in October 2008. 23 1.2 Largest Bank Write-downs and Capital raising. 26 6.1 Average annual percent growth in real GDP, 1930–2007. 124 7.1 Number of job cuts from banks, insurers and funds since August 2007. 148 7.2 Net Overseas earnings of UK financial institutions. 164 7.3 Relative shares of total turnover in London by currencies traded (1995). 172 7.4 Overall EMU impact activity on Turnover in Financial Futures and Options – Principal Exchanges. 174 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 2011-03-01 [...]... licensed to Taiwan eBook Consortium - PalgraveConnect - 201 1-0 3-0 1 0 2-1 0-2 000 0 2-1 0-1 982 0 2-1 0-1 979 0 2-1 0-1 976 0 2-1 0-1 973 0 2-1 0-1 970 0 2-1 0-1 967 0 2-1 0-1 964 0 2-1 0-1 961 0 2-1 0-1 958 0 2-1 0-1 955 0 2-1 0-1 952 0 2-1 0-1 949 0 2-1 0-1 946 0 2-1 0-1 943 0 2-1 0-1 940 0 2-1 0-1 937 0 2-1 0-1 934 0 2-1 0-1 931 0 2-1 0-1 928 0 2-1 0-2 003 –0,3 0 2-1 0-1 997 –0,25 0 2-1 0-2 000 –0,2 0 2-1 0-1 994 –0,1 0 2-1 0-1 997 –0,15 0 2-1 0-1 991 –0,05 0 2-1 0-1 994 0 0 2-1 0-1 988... 0 2-1 0-1 991 0,1 0 2-1 0-1 985 Random normal process 0 2-1 0-1 988 0,15 0 2-1 0-1 985 0 2-1 0-1 982 0 2-1 0-1 979 0 2-1 0-1 976 0 2-1 0-1 973 0 2-1 0-1 970 0 2-1 0-1 967 0 2-1 0-1 964 0 2-1 0-1 961 0 2-1 0-1 958 0 2-1 0-1 955 0 2-1 0-1 952 0 2-1 0-1 949 0 2-1 0-1 946 0 2-1 0-1 943 0 2-1 0-1 940 0 2-1 0-1 937 0 2-1 0-1 934 0 2-1 0-1 931 0 2-1 0-1 928 22 The Banking Crisis 0,15 Dow Jones Industrial Average 1928–2008 0,1 0,05 0 23 (given that the observations are daily)... the future of the financial globalization process as a whole The book is divided into three parts The first part, The Global financial crisis: Rules and Ideas, is theoretical and presents an interdisciplinary review of the causes and consequences of the global financial crisis In the first chapter, Paul De Grauwe notes that the paradigm that financial markets are efficient has provided the intellectual backbone... currency in the international monetary system The international status of the euro has been on the international agenda since the very creation of the euro a decade ago It has gained even further attention in the wake of the global financial crisis as the latter could have been expected to imply an increased questioning of the global role of the dollar While the international role of the dollar is currently... scrutiny, the EU and its currency have not played any sort of proactive role in this regard The financial crisis has – if anything – rather exposed the lacking leadership of the EU with regards to global monetary and financial governance, as well as the lack of credibility of the euro as an alternative to the dollar in the global political economy 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona... both the commercial banks and the investment banks built up a lethal combination of credit and liquidity risks 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 201 1-0 3-0 1 3000 Paul De Grauwe 19 A centrepiece of the efficient market theory was that financial markets were capable... Stefan Collignon discusses the moral economy of money and the future of European capitalism The financial and 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 201 1-0 3-0 1 4 5 economic crisis has raised new questions about the future of the capitalist system Twenty years after the. .. paradigm told us 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 201 1-0 3-0 1 Paul De Grauwe The Banking Crisis that financial markets can perfectly regulate themselves and that regulation by governments or central banks is unnecessary, even harmful, for as we all know bureaucrats... revamp the debate about British entry into the EMU made by the early Labour administration, the issue has been left aside for a long time, to surge again to the attention of the public only with the explosion of the global financial crisis Is there a link between the 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan... between the financial fraction of capital and the industrial one, and the dominance of the former over the latter The separation between the industrial and the financial fractions of British capital and the prevalence of City’s interests over industrial macroeconomic preferences has also been recognized as an important factor of the British decision to keep the UK outside the EMU (Talani 2000) This chapter . PalgraveConnect - 201 1-0 3-0 1 The Global Crash Towards a New Global Financial Regime? Edited by Leila Simona Talani 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material. Congress Cataloging-in-Publication Data The global crash : towards a new global financial regime? / edited by Leila Simona Talani. p. cm. ISBN 978–0–230–24341–5 (hardback) 1. Global Financial Crisis,. Crash 10.1057/9780230281530 - The Global Crash, Edited by Leila Simona Talani Copyright material from www.palgraveconnect.com - licensed to Taiwan eBook Consortium - PalgraveConnect - 201 1-0 3-0 1 Also by Leila Simona Talani FROM